There is a common misconception that computer hacking is a bad thing. Computer hacking is not necessarily evil and comes in many forms. The hacker community generally recognizes 2 or 3 different kinds of hackers. All have different motivations, different strategies, and different worldviews.

Black Hat Hackers (crackers)

Black hat hackers, or crackers as they are often referred to, are the types of hackers we all envision and see in the movies. These guys (and gals) are bold, powerful, and just want to break stuff. Black hat hackers often come in the form of younger kids (script kiddies) who rely on other people’s code plus some homemade “optimizations” to cause problems for other programs/computers/websites. These hackers are driven by the fun and the power obtained from causing these programs to bend to their newly imposed rules. Although this type of hacking can technically become very lucrative, stealing credit card numbers isn’t the way it’s done. The black hat hacker is underground, and deals with an underground sort of clientele.

White Hat Hackers

White hat hackers, as you may have guessed, are the polar opposite of the black hat hacker. These hackers use their powers for good, and fend off the evil black hats as their full time gig. White hat hackers will end up in a government job or working at a bank to help plug up security risks that the black hats may try to exploit. Interestingly enough, a lot of these white hats came from the dark side. Many white hat hackers were evil in their younger, immature days.

Grey Hat Hackers

Grey hat hackers are again, exactly what you might imagine (something tells me a computer genius didn’t come up with this nomenclature). These hackers walk the fine line between good and evil, often times breaking things that may cause harm, but they do it to prove a point, or to make the world a better place. This is often where we run into “hacktivism”. Hactivism is the advancement of political or personal ideologies by hacking into an “enemy” system. The recent outbreaks of Anonymous and LulzSec are great examples of hacktivism.

Perek Grows up

As a devoted Apple fanboy, I love rolling around in the comfort that is virus-free-computers. The Mac simply doesn’t get them (yet). In trolling through the numbers though, it becomes pretty clear pretty quickly that Apple just doesn’t have a big enough market share to warrant an attack. Why attack something that will gain you almost no visibility? Windows has the most users and therefore is under the most attack. As apple rises in popularity, so will the viruses and hacks. So buy one now before they get too popular! 😉

In The News

The news is blowing up with computer hacking in recent months/weeks/days/hours. Some major h4ck5 are taking place at some of the most secure points on the interweb. The CIA, the Senate, Sony Pictures Entertainment, Public Broadcasting, ATM Networks, all of these are being hacked into and data is being posted all over the place. The culprit? Well, if they knew, it wouldn’t be happening. But, a group of hackers under the organization name of LulzSec is taking lots of the credit. LulzSec is (was) a group of apparently 6 hackers wreaking havoc in the online world. I’d give you a link to their website but to be honest I’m a bit scared going there myself. IF you’re interested, Google it (unless Google got hacked). You can also find out more on some other obscure websites like the New York Times.

Now – change your pants, and try this

Reading all this stuff freaked me out. And a hack ratio of 75% within the Good Guys To Know is high enough to get me to take action. The most common places you or I will get hacked are our email programs or Facebook. Here are a couple links that show you how to check if you’ve been hacked, and what to do about it. The basic logic? MAKE YOUR PASSWORD VERY COMPLEX, AND DON’T REUSE IT EVERYWHERE!

in my quest to find a noble cause for the proceeds from our Swear Jar challenge, I thought I’d revisit a topic I was pretty excited about back in college; micro-lending. It’s one of these ideas that everyone seems to love, and is a compelling story as one step that could be taken to start eliminating poverty in the third world.

As with a lot of stuff I thought was great in college, after researching with a little bit more of a skeptical mindset, I found that it may not be the silver bullet I used to think it was for ending poverty, but I still think it has its place, despite criticisms, and I still think it’s a great vehicle for the GoodGuys to invest in.

So let’s start out with the broad description of Micro-Finance. Micro-Finance is providing financial services to very low-income individuals or groups that traditionally do not have access to conventional banking services. This is stuff we, in the west take for granted: Having a safe and secure place to hold your money (savings), having a way that you don’t have to pay for everything in cash (checking), paying small regular payments in order to make sure a disaster doesn’t destroy your finances (insurance), and finally, a way to purchase things up front, and pay for them later (credit).

Micro-credit/micro-lending is generally understood as providing small loans to borrowers that live in poverty, and is designed to spur entrepreneurship. The idea is that small amounts of capital can mean big opportunity for the poor to improve their situation. Here is one example of a micro-borrower that couldn’t make a profit with his water-selling business, and $360 microloan allowed him to buy an underground water tank and start turning a profit and growing his business.

So these are borrowers that conventional wisdom would say are horrible credit risks. They generally have no collateral that the bank can go after if they default, their income is shaky at best, and they usually don’t have access to other financial services that we take for granted. Savings accounts, insurance, etc. Also, there’s an economy of scale issue in that there are costs to banks to servicing loans. If you were a bank, would you rather do the paperwork, research, followup on one $5000 loan, or one hundred $500 loans?

So enter micro-lending institutions; banks that specialize in lending to these types of borrowers. There is a lot of literature out there, and many different setups that I don’t really want to get into. Some banks require borrowers to form groups to “keep each other honest,” some banks focus on lending to women because they have been shown to have lower rates of default, etc.

Because these loans are so expensive to service, borrowers are usually expected to pay a higher interest rate that we, in the US, would expect. Shout out to listener Chris, who actually develops web-interface tools to analyze different data from microfinance institutions. Using his dataset, it looks like these banks yield upwards of 30% on their loan portfolios. This may seem a little extreme to charge a borrower 30% APR on a loan, but the alternative sources of credit to these borrowers typically charge even more. There are reports of loan sharks charging upwards of 100%/month.

The final piece of the puzzle is that since it’s hard for banks to make money on these loans, several non-profit groups have cropped up that work to finance these loans through the local banks like Kiva.org. Kiva allows individual lenders from all across the world to “donate” as little as $25 towards a loan to an entrepreneur in another country. Kind of like adopting a foreign child, you are adopting, in this case, a small business. It truly is an investment, so when/if the borrower pays back the loan, you can re-invest, or pull your money out. An important point to remember, though, is that this still costs money, so the borrower themselves is still paying an interest rate that goes towards recouping the bank’s costs associated with servicing the loans.

So now the picture is complete. Charity-minded lenders who want their dollars to last, can invest small amounts in small businesses in third world countries. The local banks lend out the money at a reasonable interest rate, and the borrowers grow their businesses and pull themselves out of poverty. Then we all hold hands and celebrate together;

“Microfinance is not charity; it is just widening opportunity for the people who deserve it…We have the technology and the tools to alleviate poverty on a global scale. All that is standing in our way is education and will,” – Natalie Portman

Bring in the criticisms of micro-credit! So as with anything that everything likes, eventually people are going to poke holes in the logic and find out that things aren’t all they are cracked up to be. I read this very good article by a guy who brings up some good points, and goes through what he believes are the 5 myths of micro-credit. I think they are well argued and valid points, but I want to take them one by one and talk a little bit about why I still think that Kiva is a good place to stash the GG2K cash.

1. The poor should be self-employed rather than work for wages.

Totally agree, that a big problem with microcredit is that people tout it as the one clear solution to poverty in the third world. Not everyone is an entrepreneur, and millions of people in poverty doesn’t mean that we need millions of entrepreneurs starting tiny businesses to pull themselves out of poverty. BUT, it is clear that these loans DO help SOME people. And many of the success stories that you read on all of these websites, end up with the borrowers expanding their business to the point where they need to hire several workers to maintain their business.

2. Loans are the main financial service needed by the poor, whereas they really need savings and insurance.

We are used to the concept of saving up for something; we decide we want something, like an Ipad, and save small amounts of money, each month, until we have enough to buy it. This is HARD! As we get closer and closer to the goal, other things seem to magically crop up. We have an emergency car repair we have to pay for, there’s a concert we need to buy $100 tickets to, etc.

This concept of “saving up” for something becomes even more difficult in the developing world where there is intense pressure to share your wealth. Think if you were in a very poor village and you had the idea to save up and buy a cow. Let’s make it even better and say you’re a woman. So you start saving up the capital to do this, but all these other things start to arise. Other people in your village see that you’re saving money (because you don’t have access to a bank with direct deposit), and your neighbor’s kid gets sick and needs medicine. They come to you and ask for a little bit of money, and there is intense social pressure to comply because this person has probably helped you in the past. This is a form of informal insurance. Once again, a financial institution that we take for granted. Or your husband comes home from a hard day of work where he earned $2 and he says, “hey, woman, I see you are saving money, give me $5 so I can go get a beer.” And because of cultural norms, you oblige. This makes it infinitely harder to “save up” for something that could really improve your situation.

If, instead, you decide to join one of these micro-lending groups, and it’s your turn to get the money this month, you get all the money up front, and immediately spend it (buy a cow). Now you have an obligation to pay back this loan so when your neighbor comes needing some money for their kid’s medicine, or your husband wants a drink, you can point to this outside obligation you have to pay back the loan. So it’s basically the same thing as the first scenario, but instead of “saving up,” you are now “saving down.” In the absence of other institutions like insurance and banks, micro-credit lending groups can offer a way for people to do this. Here’s the kicker; EVEN IF THEY ARE NOT STARTING A SMALL BUSINESS! So even if the borrower is just getting that small amount of money and spending it on education, or to get through a tough time, it still improves their quality of life because it’s like a forced savings plan. It also helps to foster the idea of keeping what you earn and saving. So while it might not be exactly what the architects of micro-lending had in mind at the outset, it is still something that can improve the overall situation of a borrower, even if their economic situation doesn’t improve dramatically. Which is why I still think this is a noble thing to spend our swear jar money on.

I think this argument is a bit fallacious. (false dilemma?) Just because entrepreneurship and management may be more important, doesn’t mean that access to capital isn’t also essential. Even if it’s not the most important thing, it’s the easiest part of the puzzle for someone sitting in MN to help with.

4. The non-poor don’t need credit

I don’t really understand why this is a myth of micro-credit so I’m not going to respond to it. Clearly not compelling enough to dissuade me from investing.

5. Micro-credit institutions can be self-sustaining, whereas the evidence shows that this is not the case, that most institutions do not make enough money on their own to survive.

‘Who cares if they are self-sustaining or not?’ As long as organizations like Kiva exist, there are investors/donors who are not expecting a return on their investment, and would likely even accept a small loss. So it doesn’t matter if banks can’t get enough interest rate revenue to sustain operations, because they are subsidized by charity

So in conclusion, despite some of the problems, and lack of measurable indicators of the impact of micro-credit on third world communities, I still think that it’s a worthwhile investment. At its worst, it gives the poor an excuse to tell their neighbors “hey, what’s mine is mine,” fostering a culture of self reliance, and making it easier for them to “save.” At its best, it helps individual entrepreneurs gain access to capital, allowing them to enter markets not available to them before, and drastically improving their quality of life.

We’ve all said it before; “We put a man on the moon! Why can’t we figure out the solution to ________ ?” Well, The X-Prize Foundation aims to solve those problems by enticing our brightest minds with, what else, money. This week the Good Guys discuss the merits and achievements of the X-Prize Foundation. From space flight to life extension to alternative energy, the X-Prize just may be the future of human innovation, and it behooves a Good Guy To Know to understand why.

Behind every good guy to know is a good girl to know. In this podcast we introduce you to the secret society of Pick Up Artists, masters in the game of picking up women, by interviewing a local PUA named Slim. Mitch reviews the Yahoo! answers challenge and Perek introduces a challenge that may prove costly for the foul-mouthed… “Don’t hate the player, hate the game!”

To take a look at all of our Yahoo! answers responses, head to these links:

The prisoner’s dilemma is a great example of game theory. In figure 1 you can see the generalized form of the payout structure for 2 individuals (vertical and horizontal) either cooperating and telling the truth (C) or defecting and not confessing (D). If you are interested in learning more about the prisoner’s dilemma, the wiki on the subject is a great place to start! http://en.wikipedia.org/wiki/Prisoner’s_dilemma

FIGURE 1: Prisoner’s Dilemma

Figure 2 shows a similar payout structure to the standard prisoner’s dilemma as it applies to the decision/law ceasing cigarette advertising on television. As you can see in the bottom right quadrant, one effect of the ban was to allow both companies to retain more profits without fear of the other company capitalizing by advertising.

This example is based on the youtube video here, where you can see a bit more of a detailed look at the concepts involved.

FIGURE 2: Advertising

The Survivor example is one of my favorites ever. I doubt Richard had any idea exactly how accurate his decisions were on a purely statistical level. This is a great way to show how naturally we all process this data. A Good Guy To Know should realize how powerful this kind of thinking can be! This chart was taken from the game theory textbook Games of Strategy (Dixit, Skeath, Reily Jr., 2009).

A good guy to know strives to find common ground on controversial issues. I recently read in Dale Carnegie’s How to Win Friends and Influence People, it’s usually not worth it to fight someone on something they aren’t going to change their mind on. If you really want to win someone over to your ideology, you need to start from a place you can both agree on. So when I decided to do a podcast on the problems with American education, I wanted to try to find some facet of the discussion where there could be some common ground. Education has always been a controversial issue, but in the last several years, with the decline of American students’ performance relative to other nations, and more recently, with all of the excitement in Wisconsin, people are looking for answers on how we can make our system better.

So I came across this McKinsey study that focuses on one central question; “Who are we, as a society, attracting to the teaching profession?” Which begs the next question, “What does this mean for the students?” The study systematically compares this to who other countries are attracting to the teaching profession, as well as whom we attracted to the teaching profession 40 years ago.

Disclaimer: I have many people very close to me that are teachers and I am pretty sure they are all awesome at it. This post/podcast is meant to summarize McKinsey study and get people talking about one possible way we could improve education. As with any study, there are always many individual exceptions to the trends, (but it’s still valuable to think about the trends)

Great teachers get results no matter what. Many studies since the 1970’s have shown that the greatest predictor of student success is the quality of their teacher. There is an awesome American Radio Works documentary where one guy says something like, “A great teacher could teach in a cave and still get great results.” Other things are important; family support, poverty, class size, resources, etc. But these pale in comparison to teacher quality.

“Success” is hard to measure, but for the purpose of this study, the only real way to measure student “success” is by looking at test scores. Unfortunately, it’s the best way we have to quantify how much students achieve. There is so much more learning and growth happening that doesn’t show up on test scores, but we aren’t going to be able to have any sort of meaningful discussion if we don’t have some sort of indicator of how effective a teacher is. Student test scores become more valuable when they are used comparatively, i.e. compare a student’s score at the beginning of the year, compared to the end of the year and see how much they learned. Not a perfect measure of success, but it’s what we have.

Finally, we need to assume that test scores (think ACT/SAT) of graduating college seniors mean something, too. Yes, yes, I know some people are bad test takers, and there are really smart people that do poorly on these standardized tests. But at some level, high performance on these tests indicates higher achievement in whatever profession that graduate chooses. Again, I’m sure there are a million exceptions to the rule, but overall, high test scores tend to point to higher aptitude indivuals, who tend to exhibit higher performance in the real world, no matter what profession.

So by now you can probably guess where this is going, remember, we are trying to answer the question “Who are we attracting to teaching, and what does this mean for students?” So McKinsey focused on students in the top third of their graduating classes. (Sample size was 900 “top-third” students and 525 current teachers that came from the top-third) They found that of today’s graduating college seniors planning to become teachers, 23% come from the top third of their graduating class (by SAT scores). I went one step further and found data on the average SAT scores for intended majors. (My major; business, doesn’t have super high marks either).

Now there’s nothing initially surprising about this. If you assume a normal distribution across all majors, it is not shocking to see that about a quarter of graduating education majors come from the top third, until you start using the data comparatively. So McKinsey compared their data to the test scores of graduating education majors in Singapore, South Korea, and Finland, and found the following:

This is where it starts to get dramatic. For some reason, these top performing countries (again, by student test scores, see assumption 2 above) are attracting ALL of their teachers from the very cream of the crop, while the US is only recruiting 23%!

Another “aha” moment I had was when I read the following about comparing the caliber of student America attracts to teaching now compared to 40 years ago;

“Experienced observers in the US say this is a dramatic change from the situation up through the 1960’s and mid 1970’s, where the academic quality of the teacher corps was effectively ‘subsidized’ by discrimination, because women and minorities didn’t have as many opportunities outside of the classroom.”

So what they are saying here, is that now that the wage gap between men and women in other careers has shrunk (arguably to nothing), the top-tier aptitude women and minorities are now becoming doctors, lawyers and business people, rather than defaulting to teaching as they may have felt pressure to 40 years ago.

With the question of “who” we are now attracting to teaching answered, the McKinsey study then asks the question “why are we no longer attracting top talent and what can be done to remedy this?” They do so by interviewing these “top-third” graduates about their career choices and their perception of teaching as a possible career choice. I encourage you if you’re interested to check out the full study, but here are some of the highlights:

The most important factors “top-third” students looked for in a career in order were: quality of co-workers, prestige, challenging work environment, and high quality training.

Only 55% of top-third students thought that teaching offered a “competitive starting salary.”

Of the top ten attributes top-third students look for in a career, five have to do with compensation and advancement.

When asked to rate this statement: “If I were to do well in this career, it would be financially rewarded,” 13% of top third students not going into teaching strongly agreed, 29% of top third students going into teaching strongly agreed, and perhaps most telling, only 7% of current teachers that came from the top third strongly agreed.

So finally we can attempt to answer the intentionally provocative title of this podcast; “Are teachers really underpaid?” I’m not sure if this McKinsey study offers a definitive “Yes,” for current teachers, but I think we can say, that if we want to attract the cream of the crop to the profession, this is a lever that policy makers and teachers unions would be wise to use. Compared to the rest of the world, and America of 40 years ago, such an important profession does not have the prestige it deserves, and I don’t think it’s a great leap to attribute this to the low compensation of the profession.

For those that love getting political, here is a clever Harvard study that attempts to weigh the relative effects of “wage-compression” and “wage-parity in other professions.” It basically concludes that while unions have indeed increased the average wage of teachers, the total payscale has been compressed, making it difficult for higher performers to be compensated accordingly, which detracts high performers from entering the profession.

I suspect that teacher compensation is a much bigger deal than even the McKinsey study suggests. I think that recent college graduates are likely to rate idealistic attributes like great co-workers and good training higher in a survey like this because they don’t want to be perceived as greedy. I know that when I was trying to decide what I wanted in a career, compensation and opportunity was at the very top of my list. Teaching runs in my family’s blood, and I loved being a tutor in college, but I never seriously considered becoming a teacher mostly because I did not want to make the lifestyle trade-offs. Check out this graph that was in the appendix of the McKinsey study, presenting the salary of a teacher as a percentage of the wage of lawyers and engineers.

So next time things start to get heated in a discussion about the American education system, (especially if there’s a teacher in the room), rather than rag on unions, the achievement gap, and school vouchers, brush up on these studies (don’t forget to check out the appendix for some more cool graphs) and lead with saying something like “Hey, I think a lot of things would start to get better if teachers were paid more…” Common ground is a beautiful thing. Also, let’s go hug some teachers, because after going through all this material, it’s clear that they are uber-important, and they are choosing to teach for some pretty noble reasons.

Say ahhh! In this podcast, our resident Dr. Puffer teaches you how to make the most out of your next visit to the doctor. The Good Guys discuss just how valuable a paper clip can be and Perek introduces a challenge to test who is the most savvy Wall Street trader!

Every Good Guy should have a Good Joke on deck. Nothing is worse than being in a group when someone says – “anyone know any jokes?”, and silence follows. Consider yourself in good shape after we fire tons of jokes at you in this episode. This episode was recorded on top of mount everest (Denver) with all the Good Guys in attendance. We always have a great time when we’re in the same room, even when we eat garbage meat. We hope you like at least one of these jokes and keep in in your repertoire for later. Geo introduces a challenge that could prove profitable…

Every Good Guy needs to know at least a little something about real estate. This episode the Good Guys invite realtor Josh Aberson on the show to discuss common mistakes, recommended practices, and other great info on buying your first house. We recap on the year long challenges and go over how much we all enjoyed the yoga challenge. Mitch introduces a new “offal” challenge that’s sure to make you cringe.

Like complaining about your crappy airline experiences? Mitch tackles the history of airline deregulation and tries to convince The Good Guys that things are not as bad as you think, and why everyone should LOVE baggage fees. We crown the king of the nerds as there is a clear winner from last episode’s pi challenge. Chad conjures up painful memories of elementary fitness tests with this episode’s challenge.

*The airfare prices are in 1995 dollars, and the crude oil prices are in 2010 dollars. The point of this isn’t to compare dollars to dollars, but to show that over the past 15 years, airline prices have gone down compared to the CPI, while oil prices have sky-rocketed. Remember that fuel prices now comprise 30-40% of airline’s expenses.